Thursday, May 28, 2009

Deja Vu (All Over Again)

Anyone who knows a little about European history may recall that in pre-Mussolini Italy, workers took over factories (by force) and ran them into the ground. Throughout history, workers have proven to not be the best business people. There is much more to running a business than taking orders and counting the money. Workers are workers. They are skilled-unskilled, union-non-union, but they are workers. They are there to work. They own a resource, but are not the entire entity.

This is not to say that worker ownership is always a bad thing. Many times it comes to pass that workers are offered stock options as part of a incentive plan, but that doesn't mean they are in control of day to day operations. There have been successful worker cooperatives, which can be quite problematic to run with so many cooks in the kitchen. The reason it is difficult? As it is in government, direct democracy is a very difficult process. Thus, using this model in the business world can (and does) bog down the decision-making process, which is quite vital to the maintenance and growth of a company.

The 1920s Italian situation was serious, in that the seizures were involuntary and workers were not trained properly to assume control of such an entity. The owners who put up the capital for the company were not compensated for their investments, and were completely cut out of the loop. In addition to all of this, they were demonized as greedy and insensitive to the cause and plight of the Italian workers who toiled in sweat in their plants and shops.

Fast forward to a recent US News and World Report article.

A government-brokered deal between struggling U.S. automaker Chrysler and Italian automaker Fiat moved another step closer Monday, when United Auto Workers Union negotiators reached an agreement to accept concessions in exchange for what could eventually become majority ownership of Chrysler.

The Wall Street Journal reports, "The United Auto Workers union would eventually own 55% of the stock in a restructured Chrysler LLC under the deal reached by the union and the auto maker." Fiat's stake in Chrysler would be capped at 35 percent, "and the U.S. government and Chrysler's secured lenders together will end up owning 10% of the company once it is reorganized."


Today, we see much of the same script.

The unsecured investors (workers) are being given preferential treatment over the secured investors (stock and bond holders). Those who invested their money into the company are being cut out of the loop here, while the workers are being given sweat equity. In the interim, the legitimate investors are being demonized as greedy. If this holds true to the form of 1920s Italy, it will only be a few years (maybe even months) before things really tank out in the car industry.

Knowing what we know about the outcome of 1920s Progressive movement, how is it we are letting the same conditions arise unchecked? We see these things, along with a government that wants to print money. This will only result in hyperinflation, like we saw back in the 1920s. It did not buy them out of that mess then, it will not buy us out of this mess today.

I know it's slippery slope, but we've been down that slope before. It would seem that there would be enough people smart enough to see it. I am convinced there are many, many people who do understand this and agree with my claims. But unfortunately, they are not in a position to do much about it. The same held true back then, that is until a man named Mussolini came along and made the trains run on time.

If we do not want this to repeat itself, it would be a good idea to stop this madness now. It would be smart to do it while there is time to reverse this course. Wait too long and it will be too late.


10 comments:

Greg said...

Somewhat related story - have you heard the allegations that the decisions on how many and which Chrysler dealerships to close came not from the board room, but from the White House? And just by coincidence, dealerships owned by big Democrats were spared, while their competition was wiped out. Have you heard this story? Right now, it's only a little more than a rumor, but it could be big....

Mustang said...

Greg:

The only bar to this story getting a lot of attention is the leftist media, who benefits from a communist in the white house. I'll be listening, but I won't be surprised if we hear not even a peep.

LA:

I think it's already too late, my friend. We're trashed as a capitalist society.

LASunsett said...

Greg at one point during my 16 hour day yesterday, I heard about the story you mention. If true, it's worse than politics as usual.

LASunsett said...

//I think it's already too late, my friend. We're trashed as a capitalist society.//

We have one chance to stop it, next years election. If we don't stop the bleeding then, you are right. It's all over.

HoosierArmyMom said...

I would accuse you, Mustang and Greg of "extreme awfulizing" and putting me in "go home and stick my head in the oven mode", but I think a bunch of "Progressive Moonbats and Rhinos" in the last election pretty much started that "phase of my life" in the last election.

Anyway, you guys are safe from accountability over may really funky mood! LOL!!!! Just the fact that everything stated is so true should be enough to merit any and all action to insure a saner election in 2010.

Average American said...

It would not surprise me at all to find that the WH did in fact pick and choose which dealerships got the axe and which ones didn't. That bucking nofama will completely destroy this country as we know it. 2010 can not get here soon enough!

L'Amerloque said...

Hi !

It has been Amerloque's contention for many years that 'Fiat' is not a car, but an Italian fashion accessory. (grin)

Best,
L'Amerloque

LASunsett said...

//2010 can not get here soon enough!//

Certainly, one hates to wish part of his life away. But in this case, the stakes are high and the damage that can be done is enormous.

LASunsett said...

LMAO Amerloque

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